Consolidation of the Fleet Leasing Industry: 1986-Present
Automotive Fleet chronicles the acquisitions and mergers of the major fleet leasing and management companies over the years.
Consolidating has been an ongoing process in the leasing industry.
Consolidation typically occurs in emerging industries, but, sometimes “trigger” events occur, which causes a wholesale “reordering” of an established industry segment. This occurred in the telecommunications industry, with the trigger events being the government-mandated breakup of AT&T and the emergence of cellular technology. This, likewise, occurred in the airline industry with deregulation of the passenger air carriers.
A common denominator with all of these industry consolidations was a change in governmental regulations, emerging (disruptive) technology, or changes in the tax code.
This is what occurred in the fleet leasing industry triggered by the Tax Reform Act of 1986. Without a doubt, the Tax Reform Act of 1986 was the watershed event in the fleet leasing industry, the consequences of which are still playing out to this day.
Prior to 1986, significant tax benefits from the investment tax credit (ITC) prompted companies such as Dart & Kraft, PepsiCo, and Xerox to acquire existing fleet leasing companies. However, as a result of the repeal of the ITC, many corporate entities sold off their fleet leasing business units.
Around this time, General Electric entered the market as a ready buyer and initiated a series of rapid-fire acquisitions that coalesced the industry into today’s 10 major fleet management companies.
Similarly, in the truck and trailer leasing business, there was significant consolidation. One example of the pell-mell acquisition trend in that industry segment was UPS Leasing being purchased by Rollins Leasing, and, in turn, Rollins, purchase by Penske.
Another factor causing consolidation in the fleet leasing industry was that many smaller regional lessors were family-run businesses, which, upon the eve of a generational transition sought to sell the business. Also, many smaller companies came to the realization that they would be unable to compete with larger lessors in staying current with the technological evolution of fleet management.
Fleet management companies began offering computerized online services in the 1980s, including online maintenance management programs and customer online access systems. In the 1990s, fleet management companies dramatically and quickly shifted to Web-enabled services.
Ultimately, every service offered by fleet management companies was converted to a Web-enabled program, which dramatically increased fleet productivity, but required a substantial corporate investment.
On the following pages is a chronology of the consolidation of the fleet leasing and management industry. The Chinese proverb says, “May you live in interesting times,” which, in our opinion, best summarizes industry developments in the fleet leasing industry from 1985 to the present.